TPP, a blessing for Asia-Pacific economies?

Ministers from the 12 nations involved in the Trans-Pacific Partnership free trade talks wrapped up their four-day meeting here last Tuesday without a full agreement, thus failed to cut a deal by the end of this year as Washington had expected.

A few days earlier, the 159-member WTO reached an agreement in the Doha round of its multilateral trade negotiations at its ninth ministerial meeting in Bali, Indonesia. The breakthrough came, however, after many missed deadlines in more than a decade of negotiations.

The two meetings, though with different agenda and outcome, underlined nevertheless the complexity and difficulties for global trade rule setting.

The Bali accord served to offer some confidence to the world trade body, especially at a time when many countries are seeking regional trade agreements outside the WTO framework such as the TPP and Transattlantic Trade and Investment Partnership(TTIP).

TPP'S AMBITIOUS GOALS ARE BOTH ATTRACTION AND HURDLE FOR ASIAN ECONOMIES

Throughout the 1980s and 1990s, Asian economies, ASEAN nations in particular, have embarked on a combination of multilateral and unilateral measures to reduce barriers to trade goods, services and investments. Since 2000, however, a lack of progress in multilateral liberalization, and domestic reform has led to a proliferation of ASEAN free trade areas (FTAs).

But according to a report by the Asia Development Bank,"while these agreements commit the parties to eliminating tariffs on trade between themselves, they do not effectively address regulatory barriers and other non-tariff barriers like product standards and mutual recognition agreements, services, investment, intellectual property rights, government procurement or the movement of business people -- which are all more important than tariffs for regional economic integration." That's probably part of the reason why four ASEAN members -- Brunei, Malaysia, Singapore and Vietnam --have decided to join the TPP that also involves Australia, Canada, Chile, Japan, Mexico, New Zealand, the United States and Peru.

The TPP has been envisioned as "a high-standard, comprehensive and forward-looking trade agreement that aims to address the challenges of the modern economy."

Termed as "the agreement of the 21st century" by its proponents, the TPP is very ambitious. When negotiations have concluded, it could potentially create a free-trade bloc that will comprise some 40 percent of the global economy, according to leading economists.

It aims to reduce tariffs on goods and services to close to zero among disparate economies, and address issues beyond traditional trade and investment, such as labor and environment standards, intellectual property and competitive advantage of state-owned enterprises.

As the leading drive force for the negotiation, the United States has insisted on addressing all these so-called 21st century issues, and asked its TPP partners to commit themselves to a high- standard agreement.

However, different economic interests and diverse levels of economic growth inevitably make the negotiations very difficult from the very start.

Given the complexity of the pact and the political pressure governments face in winning domestic approval, most analysts had long viewed the goal of cutting a deal by the end of this year as unrealistic. They predict that hard haggling lie ahead even in late January next year.

In a recent interview with Xinhua, Sarah Tong, senior research fellow at the East Asian Institute of National University of Singapore, compared TPP with Regional Comprehensive Economic Partnership(RCEP). the free trade pact among 10 ASEAN countries and its FTA partners of Australia, China, India, Japan, South Korea and New Zealand to be concluded by the end of 2015.

She noted that the RCEP comes to economies in the Asia-Pacific region as something more natural and something easier to understand, which offers members tangible benefits in such spheres as supply chains and regional economic integration.

As economies in the region have achieved a lot in bilateral trade pacts and regional economic integration, what they need to do is further integration, namely to add all things up and, in the process, address the inconsistencies, she said.

By comparison, TPP seems to have taken a top-down approach, in which objectives are set first, then deduction is performed to leave out what is unattainable at the moment or allow members to opt out of some of their obligations. Therefore, TPP faces much greater difficulties, she added.

To John Franklin Copper, professor emeritus of international studies at Rhodes College, Memphis, Tennessee, TPP differs from other trade arrangements in that it aims at fair trade or management of trade, instead of merely dealing with free trade.

"The TPP seems to be trying to regulate trade, and more regulate financial transactions and things that are connected to trade somehow," he told Xinhua in a recent interview.

GEOPOLITICAL AGENDA CAUSES SUSPICION FOR TPP

TPP is widely believed the economic pillar of U.S. President Barack Obama's pivot to Asia, which, with its pronounced military presence in the region, has led to increased suspicion over its intention. Some western media put it more bluntly as "having the political purpose of countering the growing influence of China."

Lisa Brandt, trade policy analyst at the European Center for International Political Economy, said in an article that TPP would have economic benefits. But it is also underpinned by geopolitical ambitions.

"The United States is keen to promote stability in the region and establish a set of rules that can serve as a future template for international economic relations."

Her views were echoed by Professor Copper, who noted that TPP is viewed by some as part of the Asian pivot.

"Since the Asian pivot is really a strategic idea, of the military thought. It means it's missing the economic aspect to it. And the TPP is the economic side...Some said that the Asian pivot will not work without TPP."

However, Many Asian economies are reluctant to choose sides between major powers in the region. When geopolitical consideration outweighs economic reality, TPP would lose appeal to its potential members. As Professor Copper noted, "Asians do not think of balance of power as the United States do...They are thinking of it more in economic terms than military power relations."

EVENTUAL INTEGRATION OF TPP AND OTHER REGIONAL TRADING PACTS

TPP, as a major regional trading arrangement, will inevitably have great impacts on the economic integration in the Asia-Pacific region. Despite allegation that TPP is intended to contain China's growing influence, China has adopted an open attitude toward TPP.

Yu Jianhua, China's deputy international trade representative, told a press conference in Bali in October that China maintains different economies should uphold the principle of openness, inclusiveness and transparency in negotiating free trade areas.

In the FTA negotiations, they should not exclude each other and each should not go his own way, but keep open to one another and be mutually promotive so that different FTAs would ultimately integrate, he said.

Chinese Commerce Minister Gao Hucheng told a press conference in March this year that China has adopted an open and inclusive attitude toward regional economic cooperation mechanism and held that all economies in the world have the right to choose the path to economic integration that best suit them.

"However, all FTA negotiations, including the TPP, should follow the principle of non-discrimination and transparency and serve as a useful supplement to multilateral trading rules rather than their replacement," he said.

According to the Asian Development Bank, there are currently more than 130 free trade pacts across Asia and another 100 in the works. Some experts have called attention to the proliferation of free-trade deals in the Asia-Pacific region and warned that this might hamper free trade itself.

For one thing, countries with smaller market make them less attractive as trade partners and are often left out of free trade agreements. For another, different and sometimes conflicting standards, rules can possibly stagnate economic growth, they argued.

Regional trading pacts led by major powers such as the TPP, should offer economies at different stages of development wider choices for liberalization and facilitation of regional trade and investment, rather than creating an overgrowth of competing trade mechanism where the law of jungle prevails, they noted.

In an earlier interview with Xinhua, APEC Secretariat Executive Director Allan Bollard said it is important for the different regional architecture of economic cooperation like TPP and RCEP to "potentially converge."

"If they diverge, that is a problem. We would not want to see part of the big economies in the Pacific in one direction and part of the other ones in another direction," he said.